Category: Economy

Crucial welfare payment will be turned into a loan from 2018, affecting 124,000 individuals who rely on it

Thousands of hard-up older people are being given a stark choice: sign up to a “second mortgage” with the government, or lose some of the financial help you receive.

In a little-noticed move, the government is axing a benefit that has been around since 1948 and has thrown a lifeline to many people on low incomes. “Support for mortgage interest” (SMI) helps financially constrained homeowners with their mortgage payments – some of them might otherwise be at risk of being repossessed. But from April 2018, SMI will no longer be paid as a free benefit. Instead, the government is offering to loan people the money, which will have to be repaid later with interest.

Critics say this means tens of thousands of people, many of them pensioners, will be saddled with what amounts to a new mortgage on top of their existing home loan. A 68-year-old woman who is still paying off her mortgage and receives SMI contacted Guardian Money to say she isn’t comfortable taking out a government loan, so she is going to reject the offer. But that means she will have to find the money to replace the benefit. “This is going to cause a lot of hardship for people,” she says.

However, others argue that it’s not the role of UK taxpayers, many of whom can’t afford to buy a home of their own, to subsidise people’s mortgage payments and enable them to acquire a potentially valuable asset they can pass on to their children after their death.

SMI helps homeowners on certain income-related benefits pay the interest on their mortgage and the Department for Work and Pensions normally sends the money straight to the mortgage lender. It was introduced after the second world war as a working-age benefit that would offer a short-term lifeline to people who had lost their job or become ill and were trying to get back on their feet.

However, almost 70 years later, many of those who receive it are of pension age and retired, and they are able to claim it indefinitely while their mortgage is outstanding. That is because pension credit is one of the qualifying benefits. The others include income support and income-based jobseeker’s allowance.

According to the government, there are about 124,000 people receiving SMI at a cost of £205m a year to the state. Almost half the recipients are of pension age and many have interest-only mortgages.

However, the government said the current setup was unsustainable, so in the summer 2015 budget it announced that from April 2018, SMI would no longer be paid as a benefit. Instead, it will be replaced by a state-backed loan, secured against the mortgaged property. The loans will offer the same support – the DWP will carry on making regular payments to the individual’s mortgage lender – but interest will be added every month to the total amount the person owes. The longer someone has the loan, the more interest they will need to pay back, so those who claim for several years could easily face bills running into thousands of pounds.

This isn’t the same as a normal loan: the mortgage holder does not have to pay it back until the house is eventually sold or transferred to someone else, though they might want to make voluntary repayments if they can afford to. In that sense, it’s like a government-sponsored version of equity release. If someone inherits the house, they will need to pay back the DWP from any available equity if the property is sold or someone else becomes the legal owner. If there isn’t enough equity, any amount that can’t be paid back will be written off.

So will the government make a profit from these loans? The DWP says no, as the interest rate people will pay will be “the rate the government borrows at” and based on official gilt rate forecasts. The latest prediction is for an interest rate of about 1.5% in 2018-19, rising to 2% in 2021-22. If you turn down the offer of the loan, SMI benefit payments will stop on 5 April 2018.

The 68-year-old who contacted us (and didn’t wish to be named) has a £67,000 mortgage. As she has decided she doesn’t want to the loan, she is going to have to find another £55 a month for her mortgage payments, “which is not a lot for some people, but is for others”, she says. “Where are people going to find that kind of money when they are only on a pension in the first place?”

Mutual insurer Royal London has criticised the way the change is being handled. “The government needs to make sure people have the help and advice they need to decide whether or not to take out a second mortgage to pay for this,” it says. “But instead, thousands of people are getting letters that miss crucial details such as the interest rate on the mortgage.”

However, the DWP says switching to loans will save it about £170m a year. It adds: “This change continues to provide a safety net to help people stay in their homes and avoid repossession. Over time, someone’s house is likely to increase in value, so it’s reasonable that anyone who has received financial help towards their mortgage should be asked to pay that back if there is available equity when the property is sold.”

The deal, which includes a support and training package, comes two months after the FTSE 100 company said it would be axing 2,000 jobs to streamline the business with a renewed focus on technology.

It also includes an intention for Qatar to buy further military equipment from Britain, namely Hawk aircraft.

About 5,000 workers in the UK are employed on building the Typhoon, mainly at Warton in Lancashire.

The company said the deal would not mean a reversal of the planned job cuts across its operations in Lancashire, Yorkshire, Portsmouth, Guildford and overseas during the next three years.

“We have around 5,000 UK employees manufacturing and supporting these brilliant aircraft, as well as many hundreds of companies in the supply chain. Securing this contract enables us to safeguard Typhoon production well into the next decade,” BAE Systems said.

“The difficult decisions we have taken are necessary to better balance our workforce with our workload and ensure we have a sustainable and competitive business for the long term. We don’t take these decisions lightly – and as you’d expect we did take this potential order into account when reviewing our production needs for the future.”

The deal was signed by Defence Secretary Gavin Williamson and his Qatari counterpart Khalid bin Mohammed al Attiyah.

A statement from Qatar’s armed forces said the two ministers also signed an “agreement for building up a Joint Operational Squadron” between the two countries’ air forces to provide security during the 2022 football World Cup, which the Gulf state is hosting.

Mr Williamson said the contract was the biggest export agreement for the Typhoon in a decade and would “boost the Qatari military’s mission to tackle the challenges we both share in the Middle East”.

He added: “As we proudly fly the flag for our world-leading aerospace sector all over the globe this news is a massive vote of confidence, supporting thousands of British jobs and injecting billions into our economy.”

Charles Woodburn, BAE Systems chief executive, said: “We are delighted to begin a new chapter in the development of a long-term relationship with the State of Qatar and the Qatar armed forces, and we look forward to working alongside our customer as they continue to develop their military capability.

“This agreement is a strong endorsement of Typhoon’s leading capabilities and underlines BAE Systems’ long track record of working in successful partnership with our customers.”

Qatar is the ninth country to sign a deal for Typhoon jets, with delivery expected to commence in late 2022.

The announcement comes as the Government searches for major global trade deals amid Britain’s withdrawal from the European Union.

Last week Prime Minister Theresa May struck a deal with Brussels after the first phase of Brexit negotiations, in the hope of talks progressing on to trade.

LONDON (Reuters) – Squeezed British consumers reined in Christmas travel plans and bought fewer new cars last month, setting the stage for the first fall in festive spending in five years, credit card company Visa said on Monday.

The downbeat message came alongside a cut by the British Chambers of Commerce to its economic outlook for the next two years as the business organisation sees inflation rising faster than pay for the next two years.

Visa said inflation-adjusted consumer spending last month was 0.9 percent lower than in 2016. This was a smaller decline than October’s 2.1 percent drop but still enough to make annual falls in spending likely for the first time since 2012 for both the Christmas season and 2017 overall, the company said.

The biggest falls in spending came on expensive items such as cars and Christmas trips abroad, while cheaper luxuries such as beauty treatments and cosmetics saw gains.

“People opt for smaller treats, at the same time tightening their belts when it comes to larger purchases,” Visa executive Mark Antipof said.

Black Friday discounts in late November boosted online sales at the expense of physical stores, Visa added.

British inflation has held at a five-year high of 3.0 percent since September, pushed up by the fall in the pound since June 2016’s Brexit vote, while wages have failed to keep pace.

The British Chambers of Commerce, in a quarterly update to its economic outlook on Monday, said it expected this to persist throughout 2018.

“Continued uncertainty over Brexit and the burden of upfront cost pressures facing businesses is likely to stifle business investment, while falling real wage growth is expected to continue to weigh on consumer spending,” BCC economist Suren Thiru said.

The BCC cut its forecasts for 2017, 2018 and 2019, seeing growth of 1.5 percent this year, slowing to 1.1 percent in 2018 and only partially recovering to 1.3 percent in 2019.

This is slightly below the average for economists polled by Reuters, who expect growth of 1.3 percent next year and 1.5 percent in 2019, when Britain is due to leave the European Union.

On Friday, Britain and the EU agreed on a Brexit divorce deal, enabling them to begin talks about trade and a two-year transition period that will start when Britain leaves the bloc on March 29, 2019.

But businesses said they would need to see a clear transition agreement as soon as possible for them to be able to put contingency plans on hold.

Separately, jobs website Indeed said Britain remained by far the most popular EU location for cross-border job searches, although Germany, Ireland and Luxembourg had seen some gains over the past two years at the United Kingdom’s expense.

Senior European official says that Britain ‘wants to come along with the money’ but the EU needs to see the fine print

The UK has bowed to EU demands on the Brexit divorce bill in a move that could result in the UK paying £50bn to Brussels, in an attempt to get France and Germany to agree to move negotiations to trade.

Non-stop behind-the-scenes negotiations have led to a broad agreement by the UK to a gross financial settlement of £89bn on leaving the bloc, although the British expect the final net bill to be half as much.

A senior EU official told the Guardian that the UK appeared ready to honour its share of the EU’s unpaid bills, loans, pension and other liabilities accrued over 44 years of membership. “We have heard the UK wants to come along with the money,” the official said. “We have understood it covers the liabilities and what we consider the real commitments. But we have to see the fine print.”

The bill could total £53bn to £58bn (€60bn to €65bn), although EU officials are not discussing numbers and the British government will fight hard to bring the total down. While EU sources have spoken in recent months of £53bn to £58bn, both sides are trying to avoid talking numbers to help the British government deal with the potentially toxic political fallout.

Theresa May got the agreement of key cabinet ministers last week to increase the amount that the UK was willing to pay. However, sources made clear that the discussion at the meeting of the Brexit cabinet subcommittee did not include agreeing to a particular figure, but instead to signing up to a method by which the bill could be calculated.

For EU diplomats the moment of truth will come at a lunch meeting between May and the European commission president, Jean-Claude Juncker, on Monday 4 December, when all three Brexit divorce issues will be on the table: the Brexit bill, the Irish border and protecting EU citizens’ rights. If the EU’s chief negotiator, Michel Barnier, thinks the outcome is clear, he could issue his recommendation on sufficient progress the same day.

EU leaders will make the final decision at a European council meeting on 14 and 15 December, but Barnier’s recommendation to move on to the second phase of Brexit talks will be crucial. His decision will trigger an intense round of discussions in 27 EU capitals, involving different government departments and, in some cases, parliaments.

“I think we can reach sufficient progress, but again we haven’t seen anything on paper yet, so I am always extremely cautious,” said the EU official.

The FT has reported the gross liabilities to be more than €100bn, which fall to €55bn to €75bn once the UK’s share of EU assets is taken into account.

The signs of agreement over money have left the Irish border as the most uncertain issue hanging over the talks. EU diplomats are uncertain whether the Irish government could hold up the process by calling on Barnier to refuse sufficient progress. “There are lots of different signals coming about the possibility of an Irish veto,” said one diplomat. “As things stand now, I’d say we have 50/50 chance of that happening.”

A UK government source said that with negotiations still going on there would be no comment yet on specific figures. Those being cited currently seemed “speculative”, the source added.

Sources close to the member states counselled against overoptimism about talks moving on at the meeting of the EU’s leaders on 14 and 15 December.

The problem of how the British intend to avoid a hard border on the island of Ireland remains unsolved, and the republic is insistent on “a road map” to how Downing Street intends to avoid a new border.

The British government has ruled out Northern Ireland in effect staying in the single market and the customs union, as Barnier had encouraged in the talks.

One senior diplomat said: “The divorce bill should be fine now. That was the big issue. And then it wasn’t. The border is the big worry. And I don’t know how they can square that circle. That is the big one now and it is up to the Irish to decide.”

EU diplomats were informed at lunchtime on Tuesday that enough progress on the divorce bill had been made for a meeting to be required on Friday, although the agreement may have been reached by the end of last week.

The final sum is 13% of the £660bn total liabilities the UK has committed to as a member state, including the seven-year budget ending in 2020, pension costs and outstanding loans, such as those to Ukraine, and to cover the costs of keeping Chernobyl safe.

The sum is reduced when payments that would have been made to EU projects in the UK, including structural funds, are taken into account, along with the UK’s capital share in the European Investment Bank.

The divorce bill will not be paid in a lump sum but over time, under the agreement struck in behind-the-scenes talks between Olly Robbins, Downing Street’s Brexit adviser, and the EU’s article 50 task force.

As the UK will continue to pay until all recipients of pensions have died, the final sum is unknown. It has long been expected that the final sum would land at between £40bn and £48bn.

Senior diplomats in Brussels said they were confident that the financial settlement would not now hold up the talks. “I think Germany, who has been strong on this, will be happy enough and the French will follow their lead,” said one source.

It is expected that the commission will propose a joint statement for the member states to scrutinise over the weekend ahead of a series of meetings next week.

British sources suggested that one leading leave campaigner, Michael Gove, is comfortable if that figure creeps up beyond £40bn as he is keen to show his loyalty to May. But Boris Johnson, the foreign secretary, who was seen as a key advocate of the claim that Brexit would recoup £350m a week for the NHS, has been more resistant to the suggestion of paying large amounts. He had suggested EU officials should “go whistle” over calls for €60bn to €100bn. However, he has more recently backed the prime minister’s position.

The UK is on course for the longest fall in living standards since records began in the 1950s, as analysis shows Philip Hammond’s budget will drive up inequality.

The Resolution Foundation said the stark downgrade to economic growth revealed by the chancellor on Wednesday means household disposable incomes were now set to fall until 2020. It also found the poorest third are set for an average loss of £715 a year over the coming five years, while the richest third stand to gain £185 on average.

Hammond slashed stamp duty for first-time homebuyers as part of a package of measures to boost the economy, facing evidence that the UK will be one of the weakest-growing major countries over the next five years. Britain’s growth rate was cut from 2% to 1.5% in 2017 and by between 0.2 and 0.5 percentage points over the next four years.

But the Resolution Foundation analysis shows the chancellor could have used his £3bn stamp duty cut to build 40,000 social rented properties or about 140,000homes through the government’s own Housing Infrastructure Fund..

The government’s independent forecaster, the Office for Budget Responsibility, has already warned that the key measure unveiled by the chancellor may backfire by pushing up house prices, benefiting those who already own homes the most.

The policy announced the immediate abolition of stamp duty for all properties up to £300,000 bought by first-time buyers with immediate effect, as part of a range of measures designed to address the UK’s housing crisis. The move will save four out of five first-time buyers up to £5,000.

Those spending up to £500,000 – including most buyers in London – will also benefit, as the first £300,000 of the purchase price will not be subject to the tax. Previously the tax was paid on all purchases over £125,000.

But the OBR said the changes would probably push up property prices by a%bout 0.3, with most of the increase coming in 2018.

Torsten Bell, the director of the Resolution Foundation, said the stamp duty changes were a “very poor way to boost home ownership”.

“Faced with a grim economic backdrop the chancellor will see this budget as a political success. But that would be cold comfort for Britain’s families given the bleak outlook it paints for their living standards,” he added.

The UK must “seize the opportunities” from Brexit while tackling deep-seated economic challenges “head on”, Philip Hammond is to say in his second Budget.

The chancellor will promise investment to make Britain “fit for the future” as an “outward looking, free-trading nation” once it leaves the EU in 2019.

But he will also commit to supporting hard-pressed families with the cost of living and address housing shortages.

Labour say he should call time on austerity and boost public services.

In his Commons speech, which will begin at about 12:30 GMT, Mr Hammond will set out proposed tax and spending changes.

He will also update MPs on the current state of the economy, future growth projections and the health of the public finances.

He has been under pressure in recent months from sections of his party who argue that he is too pessimistic about the UK’s prospects when it leaves the EU.

In response, he will set out his vision for the UK after Brexit as a “prosperous and inclusive economy” which harnesses the power of technological change and innovation to be a “force for good in the world”.

What will be in the Budget?

Unlike past years, few announcements have been briefed out in advance of the big day.

But the chancellor is expected to announce more money for teacher training in England and extra cash to boost the numbers of students taking maths after the age of 16.

He has signalled he wants to speed up permitted housing developments and give more help to small builders.

In a nod to younger voters, discounted rail cards will be extended.

An extra £2.3bn for research and development and £1.7bn for transport links are designed to address the UK’s lagging productivity.

Extra money is also expected to be found for new charge points for electric cars and for the next generation of 5G mobile networks.

Expect the theme of innovation to ring through the speech, with Mr Hammond hailing the UK as being “at the forefront of a technological revolution”.

Driverless cars ‘on UK roads by 2021’

Tax on takeaway boxes to be considered

Chancellor to scrap VAT on Police Scotland

Labour demands ’emergency Budget’

Will it be a ‘bold’ or ‘boring’ Budget?

The image Mr Hammond has cultivated as a safe, unflashy pair of hands in uncertain times – hence his ironic “box office Phil” nickname – was dented in the March Budget when he had to backtrack on plans to hike National Insurance for the self-employed.

Asked on Sunday whether this would be a bold or boring Budget, he settled for describing it as “balanced”.

While some Tory MPs would prefer a safety-first approach with no controversy, others want him to turbo-charge efforts to prepare the UK for life after Brexit.

Most hope he will begin to address issues perceived to have hurt the Tories at the election, such as the financial pressures on public sector workers and young people.

In remarks released ahead of the speech, Mr Hammond strikes an upbeat tone, saying he will use the Budget to “look forwards, embrace change, meet our challenges head on and seize the opportunities for Britain”.

How will ‘box office Phil’ play the Budget?

Isn’t the Budget normally in Spring?

Yes, that’s the way it’s been for the last twenty years. The last one was in March and normally there wouldn’t be another one until Spring 2018.

But Mr Hammond thinks late autumn is a more suitable time for tax and spending changes to be announced and scrutinised before the start of the tax year in April. So from now on, Budgets will take place in November.

But aside from the timing, the choreography of Budget day will remain the same.

Mr Hammond will be photographed in Downing Street holding the famous red ministerial box – used to carry the statement – aloft before making the short journey to the Commons.

While tradition dictates he can take a swig of his chosen tipple during his speech, Mr Hammond is expected to eschew anything too strong and confine himself to water during what is normally an hour-long statement.

What’s happened since the last Budget?

Quite a lot. In the last nine months, the UK has triggered Brexit and begun negotiations on the terms of its departure from the EU.

Economic conditions have changed too, although there is fierce debate about how much of this is attributable to uncertainty and negativity over Brexit.

Inflation has risen to 3%, its highest level in five years, while growth has faltered a little.

However, borrowing levels are at a 10-year low, giving Mr Hammond more flexibility, while employment remains at record levels.

The political backdrop has also changed enormously.

The loss of their majority in June’s election sparked fresh Brexit infighting within the Conservatives.

The government has the backing of the DUP, but Mr Hammond – who is distrusted by many on the right of the party – does not have unlimited political capital in the bank.

UK public borrowing up as Budget looms

Why isn’t the UK more productive?

What sort of advice is he getting?

Free market think tank the Adam Smith Institute is among campaigners urging an end to stamp duty for first-time buyers.

Philip Hammond says next week’s Budget will set out how the government will build 300,000 new homes a year.

But the chancellor said there was no “single magic bullet” to increase housing supply and the government would not simply “pour money in”.

Ministers want to speed up developments where planning permission has been granted and give more help to small building firms, he added.

Labour says ministers “still have no plan to fix the housing crisis”.

Speaking on the BBC’s Andrew Marr Show ahead of Wednesday’s Budget, the chancellor also said:

“There are no unemployed people” while discussing the threat to jobs posed by technological change – when pressed later, he said the government hadn’t forgotten the 1.4m who are unemployed

The government was “on the brink” of making “some serious movement forward” in the Brexit negotiations

Ministers would not withdraw a controversial bid to enshrine the exact Brexit date in law

The health service will not face “Armageddon” if it is not given a £4bn funding boost demanded by the boss of NHS England

More houses needed

The shortage of housing is expected to be one of the themes of the Budget, with Mr Hammond under pressure to ease the difficulties faced by first-time buyers trying to get a deposit.

He said it was “not acceptable” that young people find it so hard to buy a home, and promised to set out how the government would keep its “pledge to the next generation”.

He did not commit to the £50bn reportedly being demanded by Communities Secretary Sajid Javid to finance a house-building drive, but committed to the target of 300,000 new homes in England.

He insisted the government was delivering new homes at record levels, with 217,350 “additional dwellings” in England last year, but acknowledged more needed to be done.

Javid: Borrow more to build houses

Kuenssberg: The Tories’ housing debates

The Budget: What we know already

Focusing on sites where planning permission has been granted, he said the government would use the “powers of state” to get “missing homes built”.

It also plans to pay to clean up polluted industrial sites for house building, get town hall bosses to allocate small pockets of land to small developers and guarantee loans by banks to small house builders.

What else will be in the Budget?

Most of the announcements will be saved for Wednesday, but they are also expected to include:

£75m for artificial intelligence

£400m for electric car charge points

£100m to boost clean car purchases

£160m for next-generation 5G mobile networks across the UK

£100m for an additional 8,000 fully-qualified computer science teachers supported by a new National Centre for Computing

A retraining partnership between the TUC (Trade Union Congress), CBI (Confederation of British Industry) and the government

£76m to boost digital and construction skills

The chancellor is also expected to announce regulation changes to allow developers to apply to test driverless vehicles – and revealed he would be testing one out in the West Midlands on Monday.

The government is aiming for fully driverless cars – with no safety attendant on board – to be on the road in four years.

“Some would say that’s a bold move but I believe we have to embrace these technologies, we have to take up these challenges, if we want to see Britain leading the next industrial revolution,” Mr Hammond added.

‘No unemployed people’?

Challenged on the impact of wider automation on people’s jobs, Mr Hammond went on to say: “I remember 20 years ago we were worrying about what was going to happen to the million shorthand typists in Britain as the personal computer took over.

“Well nobody has a shorthand typist these days, but where are all these unemployed people?

“There are no unemployed people.”

Asked to clarify his remark later in the interview, he said the government was “getting people into work at a remarkable rate” and that it had not forgotten the 1.4m unemployed people in the UK.

In a later interview with ITV’s Peston, he said: “The point I was making is previous waves of technological change have not resulted in millions of people being long-term unemployed.”

What Labour is planning

Also appearing on Marr, Labour shadow chancellor John McDonnell defended his own plans to borrow £250bn over 10 years to invest in capital projects and renationalise several key industries, saying his proposals would allow the UK to “compete in a global market”.

“When you invest those sums you get a return on that investment that covers any cost of borrowing,” he said.

More than a million credit card users who are struggling financially have had their credit limits increased without asking, a charity has said.

Such borrowing could make their financial problems worse, so Citizens Advice is calling for a ban on unsolicited increases in credit card limits.

It wants Chancellor Philip Hammond to include such a move in the Budget.

But providers say protection is being improved.

Citizens Advice said its research, based on a sample of 1,300 people with credit cards, suggested as many as six million cardholders may have had their credit limits put up without their consent in the last year. Some 1.4 million of those would be struggling financially.

Providers have agreed to a voluntary code being developed by the Financial Conduct Authority (FCA), the City regulator, which would see restrictions and choice on credit limits.

They will start asking new customers for their consent before raising limits, and give them the option to carry on receiving uninvited increases. Existing customers will be given the option to ask their lender to require their consent.

But Citizens Advice is calling for the chancellor to impose a clear ban on increases which customers have not even requested.

Gillian Guy, chief executive of Citizens Advice, said: “Rather than credit card holders seeking to take on more debts, lenders are actively pushing it on people without enough consideration as to who can afford to pay and who can’t.

“Few consumers support unsolicited increases and our research shows that they make people’s debt problems worse. The chancellor must step in.”

Richard Koch, head of cards at UK Finance, which represents card companies, said providers were “thoroughly committed” to the new agreement.

“All our members undertake a thorough risk and affordability assessment of a customer’s finances whenever they apply for credit. This degree of rigour continues throughout the relationship, with ongoing monitoring of how the customer uses the credit product,” he added.

The number of people in work in the UK has seen its biggest fall in the past two years, but unemployment also fell.

There were 32 million workers in the three months to September, down 14,000 from the last quarter, Office for National Statistics data shows.

At the same time, the number of jobless – those people not in work but seeking a job – fell 59,000 to 1.42 million.

Workers’ earnings, including bonuses, rose 2.2% compared with a year ago, which still lags inflation of 3%.

Inflation steady despite food price rises

The simultaneous drop in the number of workers and unemployed people is due to the rise in people who are classed as “economically inactive” – those not working and not seeking or available to work.

This includes people studying, looking after family or home, long-term sick, or retired, and rose by 117,000 to 8.8 million over the quarter.

Matt Hughes, a senior ONS statistician, said employment had declined after two years of “almost uninterrupted growth”.

The last time there was a bigger fall in employment was in April to June 2015, when the number of people in work dropped by 45,000, according to the ONS.

Mr Hughes said: “But there was a rise in the number of people who were neither working nor looking for a job – so-called economically inactive people.”

The unemployment rate remained steady at 4.3%, and down from 4.8% a year earlier.

Separate ONS data showed a bright spot for productivity, which increased by 0.9% in the latest three months – the strongest growth rate for six years.

But this follows a prolonged period of weak productivity since the financial crisis.

ONS head of productivity Philip Wales said: “The medium-term picture continues to be one of productivity growing – but at a much slower rate than seen before the financial crisis.”

Productivity: A volatile measure

By BBC economics editor Kamal Ahmed:

Any port in a storm, but it is sensible to put today’s leap in productivity in context.

After six months of negative figures (-0.5% January to March, -0.1% April to June), today’s +0.9% jump in productivity is undoubtedly better news.

But it would need at least two more quarters of similarly positive numbers to discern whether this is just normal quarter-by-quarter volatility or the first signs that the productivity slump might be starting to turn.

The ONS measures productivity by dividing the number of hours worked by what is called Gross Value Added, the value of goods and services produced by the UK economy.

It has leapt this quarter because working hours have fallen slightly and economic growth is higher.

Whether we are actually producing more per hour worked – the key to wealth creation and better wages – will only become clear over the next six months.

And with inflation at a five-and-a-half-year high of 3% in October, pay is failing to keep up with higher prices.

In real terms, wages have fallen by 0.5% in the past year – the seventh month of lagging behind inflation.

Minister for Employment Damian Hinds insisted the figures showed the “strength of the economy”.

“A near-record number of people are now in work,” he said. “Everyone should be given the opportunity to find work and enjoy the stability of a regular pay packet.”

The CBI’s head of employment, Matthew Percival, thought the rise in productivity was “encouraging”.

He said: “Businesses will be looking for the chancellor to cement progress in next week’s Budget and maintain flexibility in the labour market, which remains a mainstay of the UK economy.”

Property website says new sellers being too optimistic by not discounting by more as overall market stalls and interest rates rise

More than a third of home owners trying to sell their house have been forced to reduce their asking price, with the number of price cuts at their highest level since 2012, according to Rightmove.

Traditionally house sellers are often forced to cut asking prices in the pre-Christmas period but this year the nation appears to be holding a collective autumn sale, said the property website.

Rightmove, which claims to list 90% of the houses being sold in the UK, said 37% of current sellers had dropped their asking price, with a typical 0.8% or £2,392 price reduction. It also warned that those who recently put their property on the market were being too optimistic by not discounting by more.

The mass price cut will be seen as further evidence that the market has slowed dramatically, particularly in London where prices have been falling. Last week the Royal Institution of Chartered Surveyors said the overall UK property market had stalled. Rics also warned that it expected the market to remain subdued in the coming months as sales stay flat or fall in most regions.

Rightmove director, Miles Shipside, said the slowdown in the housing market, the recent interest rate rise and the prediction that further rises were on the horizon suggested bigger reductions in house prices in the near future.

“Given that the market has been price-sensitive for a while and a five-year high proportion of sellers are slashing their prices, some sellers and their agents are over-pricing. These sellers may well be asking themselves if they could have saved some time and stress by pricing a lot more conservatively at the start.”

Lucy Pendleton, of the London estate agent James Pendleton, said sellers in the capital are facing some particularly tough decisions. She argues that one large price cut can work better than several small ones.

“It’s vital they don’t discount their home in dribs and drabs. By dropping the asking price in increments all you succeed in doing is making your property look stale and unwanted, with none of the surge in viewings that a keen discount can bring. There are also far too many vendors in London who think a reduction of £10,000 is enough,” she said.

The UK is at the heart of global money laundering and corruption, because the system designed to prevent abuse is failing, a damning report published today has claimed.

Anti-corruption organisation Transparency International UK has found more than 760 companies registered in the UK were directly involved in laundering stolen money from at least 13 countries, as part of analysis of 52 cases of global corruption worth £80bn.

This new research, Hiding in Plain Sight, claims companies are used as layers to hide money that would otherwise appear suspicious, and “have the added advantage of providing a respectability uniquely associated with being registered in the UK”.

The group argues it is “no accident” that the UK is used, noting it is home to a “network” of Trust and Companies Service Providers (TCSPs), which register firms to UK addresses, often nothing more than mailboxes.

The report claims that the UK’s defence against illegal activity is “woefully inadequate”: just six staff in Companies House are charged with policing four million companies. Meanwhile, TCSPs filed just 77 of 400,000 suspicious activity reports, designed to flag possible money laundering, last year.

Duncan Hames, director of Policy Transparency International UK, said: “The UK is home to industrious company factories from which unscrupulous individuals provide the corrupt with the means to hide their ill-gotten gains. The UK should recognise it has its own Applebys and Mossack Fonsecas here on our doorstep.”

“Since the Panama Papers the UK has made progress in targeting corrupt money but in a complicated and global system it’s often the case that as one area of weakness is addressed, more are discovered by those intent on channelling dirty money.

“Approaching Brexit it’s essential that the UK sends a clear signal that it won’t be a laundromat for corrupt individuals from around the world. It could start by ensuring it properly resources those who are meant to be our first line of defence, such as Companies House.”

Transparency International is calling on the government to overhaul the country’s supervisory system to combat money laundering and said it should apply a “failure to prevent” approach, which would put the onus back onto TCSPs to identify wrongdoing. In addition, Companies House should be given “sufficient resources to identify suspicious activity”.

It also wants government to stop non-UK registered agents from setting up companies, and to use financial incentives to encourage UK firms to hold a UK bank account and discourage the use of offshore bank accounts.

Meeting the needs of today’s younger workers is more likely to involve an offer of collaborative technology rather than gadgets and gimmicks

When it comes to recruiting and retaining top talent, millennials are surely high on the target list for most organisations. Largely defined as those born between the early 1980s and late 1990s, this group of twenty- and thirty-somethings makes up a substantial proportion of the current and future workforce.

In many cases, these millennials have different expectations from their job compared with previous generations, which means companies hoping to attract this talent need to look at what they can offer them.

Location, location, location

A core element of the workplace for any millennial is flexible working opportunities. According to the Deloitte Millennial Survey 2017, millennials believe that flexible working arrangements support better productivity and staff engagement, while enhancing well-being, health and happiness.

And it seems this push for flexibility is already having a profound impact on the office as we know it. Of the almost 8,000 millennials Deloitte questioned across 30 countries, 84pc said their employer offered some degree of flexible working, while 39pc said their organisation offered a highly flexible working environment.

Hot-desking and shared spaces with work benches, touchdown points or social hubs, where staff can work in a group or on their own in a more informal setting, are more attractive to millennials than old-fashioned rows of desks with fixed computers and telephones.

It appears those businesses that have made the effort to offer these kinds of work set-ups to staff will be reaping the rewards, as the study revealed that millennials in highly flexible organisations are much more loyal to their employers.

For those businesses that prefer to stick with a more traditional office layout, flexibility comes outside the building, by allowing staff to work from home or remotely.

The most forward-thinking firms will also start considering roles and functions in their organisation that could be appropriately served by employees working their own chosen hours – whether that’s compressed hours, weekend or night-time working, or term-time shifts – rather than the set 9-5, five-days-a-week pattern.

No gimmicks

One of the perceptions about keeping millennials happy at work is that they need to be supplied with fun distractions to encourage their creative juices to flow. Free after-work drinks, table football, or slides rather than stairs to get to different floors of the office, have all been mooted as great ways of attracting talented people from younger generations.

Actually, the opposite is true. Research in 2016 from the Harvard Business Review revealed that creativity and fun are “extremely important” criteria to more baby boomers than millennials when applying for a job.

Millennials will be much more interested in seeing evidence of technology that enables collaboration and contact with colleagues from any location. So think less ping pong and beer, and more Slack and Trello.

Similarly, millennials will expect to use high-quality, reliable and covetable products at work to match their home devices. If your business provides its staff with a five-year-old mobile phone and clunky laptop, don’t be surprised to find these abandoned in a drawer as your millennial employees instead choose to bring in their own favoured, newer and higher performing smartphones and laptops to use at work.

It might sound obvious, but top-notch Wi-Fi is also a must for millennials, who will expect high-speed connectivity anywhere they choose to work, whether that’s at a set workstation, from a hot desk, outside in the grounds or in a meeting room.

Take responsibility

Another core area for millennials is corporate social responsibility (CSR). According to a survey carried out by Cone Communications, 75pc of millennials would take a pay cut to work for a responsible company, compared with a 55pc average across all ages; while almost two-thirds would not accept a job from a company without strong CSR practices.

“Millennials will soon make up 50pc of the workforce and companies will have to radically evolve their value proposition to attract and retain this socially conscious group,” says Alison DaSilva, executive vice-president of CSR Research & Insights at Cone.

“Integrating a deeper sense of purpose and responsibility into the work experience will have a clear bottom line return for companies.”

This interest in CSR among millennials has a two-fold benefit for companies. First, they get to use any CSR initiatives as bait for attracting top talent; and second, they get an additional avenue for positive reputation-building. The Cone research found that 76pc of millennials want to share photos, videos and information about their employer’s CSR efforts over their personal social media channels, compared with an average of 52pc across all age groups.

“Millennials view social media as a place to curate and share content that reflects their values – and this generation is enthusiastic about showing how their work is making an impact in the world,” says Ms DaSilva

The Bank of England is expecting up to 75,000 job losses in the event that there is no deal between the UK and EU financial services sector.

The number is the bank’s “reasonable scenario” and originates from an Oliver Wyman report published in 2016.

The estimate applies to the next three-to-five years. The bank estimates up to 40,000 jobs could be lost directly from financial services, and the rest would be lost in the legal and professional services sector.

The bank has been preparing for a possible “no deal” Brexit by asking firms to submit contingency plans for such a scenario.

Lobby groups such as TheCityUK have warned that the EU should not seek to diminish the UK as a financial centre in Brexit talks.

They have argued that the EU would not benefit if it weakens the Square Mile, as jobs would likely move to Singapore and New York rather than European cities such as Frankfurt.

The UK’s economy had higher than expected growth in the three months to September – increasing the chances of a rise in interest rates in November.

Gross domestic product (GDP) for the quarter rose by 0.4%, compared with 0.3% in each of 2017’s first two quarters, according to latest Office for National Statistics figures.

Economists said the figures were a green light for a rate rise next week.

If it happens, it will be the first rise since 5 July 2007.

The financial markets are now indicating an 84% probability that rates will rise from their current record low of 0.25% when the Bank of England’s Monetary Policy Committee (MPC) meets on 2 November.

Governor Mark Carney indicated to the BBC last month that rates could rise in the “relatively near term”.

UK economist Ruth Gregory, of research company Capital Economics, said the figures “have probably sealed the deal on an interest rate hike next week”.

While many economists echo that view, some think the Bank of England will keep rates where they are.

“If all we can muster… is an acceleration in economic growth that’s so small you could blink and miss it, the Bank of England could still think better of a rate rise next week,” said Ross Andrews from Minerva Lending.

Workers in shadow chancellor John McDonnell’s constituency face highest risk of being replaced by robots, says research

Workers in the constituency of shadow chancellor John McDonnell are at the highest risk of seeing their jobs automated in the looming workplace revolution that will affect at least one in five employees in all parliamentary seats, according to new research.

The thinktank Future Advocacy – which specialises in looking at the big 21st century policy changes – said at least one-fifth of jobs in all 650 constituencies were at high risk of being automated, rising to almost 40% in McDonnell’s west London seat of Hayes and Harlington.

The thinktank’s report also found that the public was largely untroubled by the risk that their job might be at threat. Only 2% of a sample of more than 2,000 people were very worried that they might be replaced by a machine, with a further 5% fairly worried.

Future Advocacy’s report has been based on a PWC study earlier this year showing that more than 10 million workers were at risk of being replaced by automation and represents the first attempt to show the impact at local level.

The thinktank said McDonnell’s seat would be affected because it contains Heathrow airport, which has a large number of warehousing jobs that could be automated. Of the 92,150 employees in Hayes and Harlington in 2015, 36,170 (39.3%) were at high risk of having their jobs automated by the early 2030s. Crawley – the seat that includes Gatwick airport – was seen as the second most vulnerable constituency.

Future Advocacy said its report was an “attempt to encourage a geographically more sophisticated understanding of, and response to, the future of work, and also an attempt to encourage MPs to pay more attention to this critical issue”.

Opinion is divided on the likely impact of the artificial intelligence revolution on jobs. Optimists have said that the lesson from history is that technological change leads to more jobs being created than destroyed, while pessimists have argued that AI is different because the new machines will be able to do intellectual as well as routine physical tasks.

“One thing that almost all economists agree on is that change is coming and that its scale and scope will be unprecedented. Automation will impact different geographies, genders, and socioeconomic classes differently,” the report noted.

It added that “the highest levels of future automation are predicted in Britain’s former industrial heartlands in the Midlands and the north of England, as well as the industrial centres of Scotland. These are areas which have already suffered from deindustrialisation and many of them are unemployment hot spots.”

Olly Buston, one of the report’s authors, said it was vital that lessons were learned from the 1980s. “Let’s not have a repeat of the collapse of the coal-mining industry,” he said. “Instead, we should have a smarter strategy.”

Noting that there would be a political pay off for the party that came up with the best strategy for coping with the robot age, the report makes a number of recommendations for the government.

They include: publishing a white paper on adapting the education system so that it focuses on creativity and interpersonal skills in addition to the stem subjects of science, technology, engineering and maths; developing a post-Brexit migration policy that allows UK-based AI companies and universities to attract the best talent; exploring ways to ensure the benefits of the AI revolution are spread through research into alternative income and taxation models, including investigation of a universal basic income; and conducting further detailed research to assess which employees were most at risk of losing their jobs.

The report said that it was “arguably automation – rather than globalisation – that has created the economic and social conditions that led to political shockwaves such as the election of Donald Trump and the vote for Brexit.

“As artificial intelligence supercharges automation over the next decade, and this hits different groups differently, there will again profound social and political consequences. Our politicians should surely consider this carefully.”

The report found that the leaders of the four main Westminster parties represented seats where more than 25% of jobs were at high risk of being automated, while the constituency with the lowest proportion of high-risk jobs was Labour-held Edinburgh South.

High-risk constituencies typically contained large numbers of people working in transport or manufacturing, while lower-risk constituencies – including Edinburgh South, Wirral West and Oxford East – had high concentrations of workers employed in education and health.

The chief executive of the Financial Conduct Authority has warned of a “pronounced” build up of debt among young people.

In an interview with the BBC, Andrew Bailey said the young were having to borrow for basic living costs.

The regulator also said he “did not like” some high-cost lending schemes.

He said consumers, and institutions that lend to them, should be aware that interest rates may rise in the future and that credit should be “affordable”.

The head of the FCA was talking to the BBC as part of its ‘Money Matters’ coverage, looking at the issues of credit and debt in the UK.

Mr Bailey said action was being taken to curb long-term credit card debt and high-cost pay-day loans.

The regulator is also looking at charges in the rent-to-own sector which can leave people paying high levels of interest for buying white goods such as washing machines, he added.

“There is a pronounced build up of indebtedness amongst the younger age group,” Mr Bailey said.

“We should not think this is reckless borrowing, this is directed at essential living costs. It is not credit in the classic sense, it is [about] the affordability of basic living in many cases.”

‘Generational shift’

Although Mr Bailey said that high levels of consumer debt was not a crisis “in the macro-economic sense”, it did matter to struggling individuals whose stories he had listened to during visits to debt management charities.

“There are particular concentrations [of debt] in society, and those concentrations are particularly exposed to some of the forms and practices of high cost debt which we are currently looking at very closely because there are things in there that we don’t like,” Mr Bailey said.

“There has been a clear shift in the generational pattern of wealth and income, and that translates into a greater indebtedness at a younger age.

“That reflects lower levels of real income, lower levels of asset ownership. There are quite different generational experiences,” he said.

Mr Bailey was speaking as research shows young people in particular are concerned about the amount of debt they are carrying and their ability to repay that debt

He said the high price of renting and lack of income growth meant that more people had to use credit to make ends meet.

Gig economy

Recent Bank of England figures show that consumer debt, excluding mortgages, now totals over £200bn and is approaching levels not seen since the financial crisis.

The increase in what is known as “unsecured lending” on credit cards, car loan schemes, personal loans and overdrafts is running at 10% a year.

People are also saving less as ultra low interest rates eat into returns.

“Obviously we all question how long this can that go on for,” Mr Bailey said. “But in aggregate it isn’t on its own something that we should be describing as a crisis.”

He added: “I am not of the school of thought that credit should not be available to this section of society because credit should be there to smooth income in the classic sense, and we know there are more people with erratic income flows, that is one of the features of the so-called gig-economy.”

Mr Bailey said that “sustainable credit is a necessary part of society”.

LONDON (Reuters) – British lenders are planning the biggest reduction in the availability of consumer lending since late 2008, when the economy was in the depths of its worst post-war recession, a Bank of England survey showed on Thursday.

The BoE’s net balance of lenders’ expectations for the availability of unsecured lending over the next three months fell to -28.6 from -16.2, signalling the steepest contraction since the fourth quarter of 2008.

Lenders said they expected the availability of mortgages and loans to businesses to remain broadly steady over the next three months.

However, they expected demand for loans for capital investment in businesses to fall at the fastest rate since the third quarter of 2011.

The CEO of a U.K.-based wealth management firm has warned that an unruly end to monetary stimulus from global central banks could lead to pensioners and retail customers suffering the biggest financial crisis of their lifetimes.

Brian Raven, group chief executive at Tavistock Investments, believes that bond markets will be the source of the problem and are primed for a sharp reversal.

“This is the biggest financial crisis of our lifetime, because it affects the average person,” Raven told CNBC over the phone. Tavistock is focused on the U.K. but Raven said the problem could be felt more broadly around the world. He argued that bond markets are in a state “never seen before” which could soon trigger a financial shock bigger than in 2008.

Bonds — pieces of paper that companies, governments and banks sell to raise money — have seen three decades of price gains and are perceived to be a safe haven in times of economic stress. They also traditionally perform poorly in times of rising inflation. In the last 10 years, central banks have been busy buying up bonds in an effort to boost the global economy and increase lending. This has further accentuated the move higher for bond prices and many economists now believe the market has become distorted.

With central banks preparing to put an end to ultra-loose monetary stimulus, and with inflation recently seeing a pickup, there are concerns that bonds could lose value quickly in a market that is not very liquid. There are also concerns that bondholders aren’t fully aware of the risks.

“The more conservative central banks ( e.g. Bundesbank ) that have been skeptical of quantitative easing have long warned that long periods of low interest rates can sow the seeds of the next crisis by smothering relative prices in the financial markets — but it is difficult to tell where ahead of time because of the ‘fog’ created,” Jan Randolph, director of sovereign risk at IHS Markit, told CNBC via email.

“There is a risk of a sharp rebound in prices as monetary policies tighten and liquidity problems if investors stampede out these more risky markets when risks start to crystallize,” he added.

While there’s been many gloomy forecasts for the bond market, not everyone agrees that they’ll definitely see significant losses as central banks reduce their bond-buying programs. Mike Bell, a global market strategist at JPMorgan Asset Management, told CNBC Monday that this monetary tightening creates a risk but believes that the recent economic recovery should be enough to offset the impacts of lower bond prices.

“Eventually tighter monetary policy could tip the U.S. economy into recession, but we believe that the economy and equity markets can withstand at least the next year’s worth of monetary policy tightening,” he said.

“We certainly don’t expect the next bear (negative) market to be as bad as the financial crisis in 2008 as banks are much better capitalized than they were in 2008. We therefore expect the next bear market to be a more classic recession rather than a full-blown financial crisis,” he added.

Central banks are unlikely to change their strategy and so investors will be likely face higher interest rates and higher inflation. Therefore, Tavistock’s Raven told CNBC that investors should adapt and diversify their investments. Bonds with short durations, high-yielding bonds and emerging market bonds are all potential options for investors, according to Raven.